Strategic asset - this is a rare and valuable thing that a specific company owns. This may include equipment, inventory, brand, patents, customer base, highly qualified staff or unique partnerships. In particular, the company's brand is a very valuable asset. A large number of companies based on the provision of catering services note that their main asset distinguishing them from their competitors is their brand and market position. Industrial companies, on the other hand, very often describe as strategic assets a specific patent or a valuable machine enabling them to produce their main goods, which they then sell to their consumers.
Importance of strategic asset
Focusing its capacity on increasing the value of the strategic asset results from the fact that in the longer term they will be responsible for the overall value of the company. High value transactions, such as those carried out by Facebook at the acquisition of WhatsApp, were characterised by the fact that they acquired one significant strategic asset. The generation of this added value meant that they (the target companies) were able to demand a high price for taking over their company, including mainly this strategically important asset .
The benefits of owning a strategic asset are as follows:
- Having a good that gives you a competitive advantage;
- Possibility to sell the entire company on the basis of this asset;
- Increasing the book value of shares in a company.
It is also worth mentioning that cultivating a strategic asset in the context of the company's development is crucial. As indicated above, they increase, inter alia, the value of the company. In addition, they allow for a much more efficient customer acquisition, thanks to the unique features that distinguish the company.
It also happens that the entire company is a strategic asset. This is particularly popular in the case of venture capital investment funds that specifically acquire rights to shares in specific entities. Through financial support, they allocate their capital in strategically important start-ups, which are supposed to bring profitable profits in the future .
Strategic asset allocation
Strategic asset management consists in its proper allocation in the investment portfolio. Its continuous improvement is the main clue to the use of strategic asset. By increasing its value, the company is able to achieve better and better development. Bearing in mind the above, its allocation should be appropriately distributed according to the investment outlays. You should not give up on investing in your strategic asset on a continuous basis, as it may lose its competitive edge. If it loses its value then there is a high chance that the company may fall into organisational and financial difficulties. Hence, continuous investment in strategic asset is essential .
Finally, it should be added that the value of the strategically important asset should be properly separated in the accounts for the purpose of subsequent independent valuations. Thanks to the possibility to determine the expenditures made on strategic asset, the company is able to determine on an ongoing basis what the potential, estimated value of the strategic asset can be.
Examples of Strategic assets
- Intellectual Property: Intellectual property (IP) is a strategic asset that is critical to a company’s success. It can include patents, trademarks, copyrights, or trade secrets. For example, Apple’s intellectual property is one of its most valuable assets and a key driver of its success.
- Brand Equity: Brand equity is a very important strategic asset for most companies. It is the value of a company’s brand and its associated products and services. For example, Coca Cola has a very strong brand equity that helps it remain competitive in the market.
- Human Capital: Human capital is another important strategic asset. It is the knowledge, skills, and experience of a company’s employees. Companies invest in their human capital to ensure that they have a skilled and experienced workforce that can help the company achieve its goals. For example, Google invests heavily in employee training and development to help it remain competitive.
- Customer Relationships: Customer relationships are an important strategic asset as they can provide a company with a loyal customer base that can be used to generate revenue. For example, Amazon has built a strong customer base through its customer loyalty programs and customer service.
Advantages of Strategic assets
The strategic assets can offer a company a number of advantages:
- They can provide a competitive advantage and help the company differentiate itself from its competitors. Strategic assets can serve as a unique selling point and give the company an edge over its competitors.
- They can help to create a stronger reputation and brand. Customers are more likely to trust and buy from a company that has a strong reputation and a strong brand.
- Strategic assets can provide an additional source of income, as they can be leased or sold to other companies. This can give the company additional revenue, which can then be reinvested into the business.
- They can provide stability and security to the company. Strategic assets are usually long lasting and can provide a company with a reliable and steady stream of income.
- Strategic assets can also provide access to new markets and customers. This can help the company expand its outreach and reach a wider audience.
Limitations of Strategic assets
The strategic assets of a company have their limits and limitations. These include:
- Limited Transferability: Strategic assets may be difficult to transfer to other companies or markets. For example, a company's brand name may not be transferable to a different market or industry.
- High Cost: The cost of acquiring a strategic asset may be very high, particularly if the asset is rare or highly sought-after. This could limit a company's ability to acquire the asset.
- Difficult to Replicate: Strategic assets may be difficult to replicate. This could limit a company's ability to expand or grow, as the asset may be unique to the specific company.
- Limited Life Span: Strategic assets may have a limited life span, as the asset may become obsolete or irrelevant over time. This could limit a company's ability to continue to benefit from the asset over a longer period.
- Risk of Loss: There is a risk of loss associated with strategic assets. For example, if a competitor is able to find a way to replicate the asset, it could be detrimental to the company's success.
- A strategic asset can also include intangible assets such as intellectual property, proprietary software, and trade secrets. These assets are very valuable to the company, as they can be the source of competitive advantage and long-term profitability.
- Strategic assets can also include access to capital, technology, and resources. Access to capital allows a company to invest in new initiatives and expand, while access to technology and resources allow it to develop new products or services that can be sold at a premium.
- Other strategic assets include access to key customers, suppliers, and distribution channels. Having access to these relationships can provide a company with a competitive advantage, as it can give them the ability to offer better prices or services to customers and access to better resources than their competitors.
- Finally, strategic assets can also include competitive positioning and established brand recognition. Positioning the company in the market in a way that sets it apart from its competitors, as well as having a strong brand recognition, can give a company an edge in the competitive landscape.
In conclusion, strategic assets can range from tangible items such as equipment and inventory to intangible items such as intellectual property and established brand recognition. Access to capital, technology, and resources, as well as access to key customers, suppliers, and distribution channels, can also be strategic assets. All of these assets can provide a company with a competitive advantage and long-term profitability.
- KIM, Changhyun and BETTIS, Richard A., (2014) p.2053-2063
- Too, Eric G., (2010) p.25-27
- Brown, K., Keast R., Laue M., Mahmood M. N., Scherrer P., Tafur J., (2012) p.18-20
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- Brown, K., Keast R., Laue M., Mahmood M. N., Scherrer P., Tafur J., (2012) An Integrated Approach to Strategic Asset Management "Delft University of Technology"
- Kim, Changhyun and Bettis, Richard A., (2014) Cash is suprisingly valuable as a strategic asset "Strategic Management Journal. 35, (13), Research Collection Lee Kong Chian School Of Business"
- Too, Eric G., (2010) Strategic infrastructure asset management: the way forward "In: Proceedings of 5th World Congress on Engineering Asset Management"
Author: Weronika Czarna